Oil prices are expected to continue to irritate motorists and truck drivers throughout most of 2007. Last year, prices peaked at a record $79.45 a barrel. Tension in the Middle East and an expected devastating hurricane season in the United States contributed to supply concerns.

Although weather and political issues are fairly unpredictable, Energy Analyst Andrew Blakely says to expect much of the same to occur in 2007. He has forecasted oil prices to be $60-$70 a barrel this year.

Traffic congestion on highway

Drivers may see little relief at the pump as gas and oil prices are expected to remain high in 2007. Credit: DOE/NREL, Warren Gretz

“The same things that apply to 2006 apply to 2007,” said Blakely. “None of the geopolitical tensions have disappeared, and none of the weather drivers have disappeared. 2006 was heralded as being a very disastrous hurricane season, and it turned out to be very benign. The forecasters are suggesting 2007 will be a terrible hurricane season, but I think this time the market is more likely to wait and see rather than react before that.”

How extreme of a winter season is experienced will play an important role in determining the performance of the oil market in 2007. At the end of winter, prices will likely decrease; however, costs will begin to increase with the summer driving season. Demand from China and the health of the global economy will also contribute to oil prices, and according to the Australian Associated Press, so could issues in Russia and Nigeria, as well as the continuing conflict in Iraq. In addition, OPEC has pledged to cut production in a bid to maintain a buoyant cost ceiling.

Brokerage firm UBS has forecasted a strong year for the oil market and expects demand in 2007 to be greater than in 2006. “We expect oil global demand to grow at a higher rate in 2007, than in 2006. Combined with ongoing problems on the supply side and OPEC’s willingness to defend prices with production cuts, we think the outlook remains positive for prices,” said a UBS representative.

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